U.S. Federal Reserve Chairman Ben Bernanke said on Thursday the central bank was ready to take substantial measures to shore up the economy, raising expectations for a half-point interest rate cut at the Fed's Jan. 29-30 meeting.

Bernanke's comments helped ease a growing sense of gloom about the U.S. economy. A recession would hit demand from the world's top oil consumer.

Another Fed rate cut could fuel selling of the already weak U.S. dollar, potentially boosting crude and other dollar-denominated assets, which would become relatively cheap.

Oil has been trading above $90 for a month and hit a record high of $100.09 a barrel on Jan. 3.

Oil began its slide on Wednesday after weekly data showed a surprising rise in U.S. fuel stocks and a further steep decline in crude supplies.